It’s confirmed. The Tesla founder plans to proceed with the proposed acquisition of Twitter.
Once trading resumed, Twitter shares jumped nearly 22% at market close on Tuesday – having twice been halted earlier in the day.
Musk has made very public his intentions to back out, even claiming that a settlement with whistleblower Peiter Zatko breached key terms. This followed the initial, primary claim of his that Twitter had been grossly deceptive in providing information about the number of bots (fake accounts) on the platform.
This confirmation comes after Wedbush Securities’ outlook that Musk nonetheless would very likely lose any ensuing legal battle, and be forced to press ahead with the deal.
According to an official company statement from the social media giant “Twitter has breached none of its representations or obligations under the agreement”.
Wedbush analysts see “minimal regulatory risk in this deal”. Though Musk’s ownership of Twitter “will cause a firestorm of worries and questions” among the general public, media figures and the US government.
Activist investor Carl Icahn is said to have invested over $500 million in Twitter shares – an investment which may have just paid off, handsomely, with this 22% surge.
Icahn is believed to have originally made the investment on the basis that Elon Musk’s legal contest wouldn’t get off the ground. But even if it did, he would very likely lose. Icahn saw TWTR’s intrinsic value in the mid 30s – well below Musk’s finalised offer of $54.20.
Having paid an average price in the mid $30s, the profit for Icahn Enterprise is set to total over $250 million, according to sources at Wall Street Journal.
Musk and Twitter themselves later provided public confirmation that the deal will proceed. Though key conditions include Twitter staying its main legal proceedings, and upon Musk receiving financing for the takeover.
Asian equity markets are mostly up sharply this morning. That follows a big rise in US stocks yesterday and somewhat smaller gains in Europe. Some reports have said that the moves were supported by weak US economic data boosting expectations that interest rates may not have much further to climb. The Australian central bank hiked interest rates by 25 basis points at its latest policy update below expectations for another 50bp increase. Meanwhile, media reports suggest that the UK government may bring forward the date for the release of its medium-term fiscal plan currently scheduled for 23rd November.
There is no UK economic data of note today. The Conservative Party Conference continues but the next big event is PM Truss’s speech tomorrow. In the meantime, topics other than monetary policy may be discussed.
In the Eurozone, producer price data for August will provide an update on pipeline inflationary pressures. The latest consumer price data for the single currency area showed a further rise in inflation as energy and food prices, and indeed prices more generally, continued to increase rapidly. Today’s update is expected to show that cost pressures remain intense.
US factory orders are expected to have grown modestly in August. Already released data for durable goods orders showed a small fall due to a decline in the volatile transport sector. However, other orders rose and it is predicted that will also be the case for non-durable orders.
European Central Bank President Lagarde is scheduled to speak at an event for students, and so seems unlikely to reveal anything new about the ECB’s plans for monetary policy. There are no scheduled speeches from Bank of England policymakers, but several US Federal Reserve officials are set to speak and markets will watch for clues on how much further interest rates will be raised at the upcoming November meeting.
Early tomorrow, New Zealand’s central bank is expected to hike interest rates. Most forecasters are expecting a fifth successive 50bp rise taking the official cash rate to 3.5%. Looking further ahead, the consensus expectation amongst economists is that rates will peak at around 4.0-4.5% next year, while markets are priced for rates to reach 5% by May.
US bond yields fell sharply yesterday helped by the weaker US data. UK gilt also slipped with 10-year yields falling back below 4% for the first time in over a week. Chancellor Kwarteng’s decision not to remove the 45% tax band may also have supported the market. In currency markets, sterling rose against both the euro and US dollar after that news.
